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Understanding Liquidation in Cross Margin Mode

  • Updated

In crypto trading, cross-margin liquidation occurs when the cross-margin ratio of your account reaches or exceeds 100%, and your positions are automatically closed to prevent further losses. Understanding how cross-margin liquidation works is crucial for effective risk management, allowing traders to anticipate potential risks and manage their collateral across multiple positions and assets.
 

Cross Margin Liquidation Formula

Cross margin liquidation is based on the Cross Margin Ratio:

  • Formula:
    Cross Margin Ratio = Account Maintenance Margin​ / Account Equity x 100%

Account Maintenance Margin: The total minimum margin required to maintain all open positions in cross margin.

  • Formula:
    Maintenance Margin (USDT) = Notional Position Value × MMR − Maintenance Amount

Account Equity: The total value of your account, including all supported collateral and unrealized P&L.

  • Formula:
    Account Equity = Sum of (Collateral × Collateral Value Ratio) + Unrealized P&L


Liquidation occurs when:

Cross Margin Ratio ≥ 100% or equivalently,

Account Equity ≤ Account Maintenance Margin.


Leverage, Initial Margin Rate, and Maintenance Margin Rate Categories

TThe maximum leverage and margin rates vary by symbol. For the specific leverage and  maintenance margin rate of each symbol, please take a look at the Trading Rules (Leverage and Margin).


Tier Table Example 

Tier Min Position (USDT) Max Position (USDT)  Max Leverage Maintenance Margin Rate Maintenance Amount (USDT)
1 - 300,000 150x 0.33% 0
2 300,000 750,000 100x 0.5% 510
3 750,000 3,000,000 75x 0.65% 1,635
4 3,000,000 10,000,000 50x 1% 12,135
5 10,000,000 20,000,000 25x 2% 112,135
6 20,000,000 30,000,000 1x 50% 9,712,135

 

Calculating Cross Margin Liquidation

Note: The following examples use USDT for simplicity. The same logic applies to USD1-quoted perpetual swap contracts.

Example: Cross Margin with Multiple Positions

Scenario:

  • Current Balance (Collateral): 500 USDT
  • Position 1: Long BTCUSDT, 1 BTC at 90,000 USDT, leverage 50x (Tier 1)

  • Position 2: Short ETHUSDT, 10 ETH at 3,000 USDT, leverage 20x (Tier 1)
    Current unrealized P&L: BTC + 200 USDT, ETH -400 USDT

     

    Steps:

    1. Calculate Account Equity

    Account Equity = Total Collateral + Unrealized P&L
    Account Equity = 500 + (200 - 400) = 300 USDT

     

    2. Calculate Account Maintenance Margin

    Maintenance Margin (USDT) = Notional Position Value × MMR − Maintenance Amount

    Since both positions are under Tier 1, the Maintenance Margin Rate is 0.33%, and the Maintenance Amount is 0.

    Maintenance margin for BTCUSDT = (90,000 × 1) × (0.33%) - 0 =  297 USDT
    Maintenance margin for ETHUSDT= (3,000 × 10) × (0.33%) - 0 = 99 USDT
    Account Maintenance Margin = 297 + 99 = 396 USDT
     


    3. Compute Cross Margin Ratio
    Cross Margin Ratio = Account Maintenance Margin​ / Account Equity x 100%
    Cross Margin Ratio = 396 / 300 = 132%

    Result:

    Since the Cross Margin Ratio is ≥ 100%, liquidation will be triggered.
    This means the trader’s total account equity (300 USDT) is not enough to meet the total maintenance margin (396 USDT).

 

Tips for Managing Cross-Margin Liquidation Risks

  • Monitor Cross Margin Ratio: Keep your Cross Margin Ratio below 100% to avoid liquidation.
  • Add Collateral: Deposit more supported assets to reduce your Cross Margin Ratio if markets move unfavorably.
  • Set Stop-Loss Orders: Protect positions by automatically closing them before reaching liquidation.
  • Diversify Positions: Avoid allocating all capital to a single asset or direction.
  • Adjust Leverage Wisely: Higher leverage amplifies both gains and liquidation risks—use it cautiously.

     

 

Risk Warning:

Trading in cryptocurrency involves risk and potential losses. Before trading, please make your investment decisions cautiously by considering your investment objectives, experience, and risk tolerance. You are solely responsible for your investment decisions, and Flipster is not liable for any losses you may incur. Derivatives trading, in particular, is subject to high market risk and price volatility. Please obtain independent advice where appropriate. This information should not be construed as financial or investment advice.

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